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Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future

1:33 pm in Uncategorized by WI Budget Project

In Wisconsin we value opportunity, responsibility and community. We want all of our children to be healthy, successful in school and part of supportive families who live in safe neighborhoods. But since 2011, a majority of state lawmakers have turned their backs on Wisconsin’s long and proud history of investment in education, health care and other assets that once ensured the state’s civic and economic progress.

They have given large tax cuts primarily to the highest-earning taxpayers, while raising taxes for working families and low-income seniors. The result is that low-income taxpayers have a harder time meeting their basic needs, and Wisconsin has fewer resources to support investments in the state’s public schools, university system, and education for our youngest residents – investments that help create the building blocks for broad prosperity and a strong economyLawmakers gave tax cuts to the wealthy and cut investment in Wisconsin’s communities amid claims that the changes would spur job growth. But over the last four years, Wisconsin’s job growth has been slower than both the national and regional average.

Four years ago Wisconsin was made a promise. The promise was that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.

Over the next week, the Wisconsin Budget Project will be highlighting a different piece each day from our larger publication Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future. You can access the full report on our website.

State Lawmakers Act to Limit Local Control

10:38 am in Uncategorized by WI Budget Project

The underside of the Wisconsin Capitol Dome

Wisconsin’s state lawmakers seek to undermine local community power.

In recent years, the Wisconsin legislature has passed more than 60 measures that represent unfunded mandates for local governments or restrict the authority of local governments.

Many state lawmakers embrace the idea of local control, saying that they believe governing should take place at the local level when possible. But instead of expanding local control, the Wisconsin legislature has limited the ability of local governments to make decisions in a wide variety of areas.

The Wisconsin legislature added 64 new limitations or unfunded mandates for local governments in the last four years, according to this memo from the Legislative Fiscal Bureau. New limits added by lawmakers include:

  • Constraints on the ability of counties, municipalities, technical college districts, and school districts to set property tax levels;
  • Restrictions on local ordinances that protect tenants and limit landlord authority;
  • A limit on the ability of local governments to impose residency requirements on employees; and
  • The repeal of regional transit authorities. These authorities helped coordinate mass transit service among different localities.

Not all of these limitations are new. A few of the restrictions on local government that are described in the memo are essentially updated versions of previously existing limits. For example, legislative caps on school district spending date back to the 1990s. But the vast majority of the measures described in the memo represent new ways to limit the authority of local government. This Capital Times article from earlier this year describes additional ways legislators have turned their backs on local control.

Given the high number of limits on local control the legislature has passed in the last four years, it’s clear that many lawmakers favor tilting the balance of power away from local governments and towards the state.

by Tamarine Cornelius

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Job Growth in Wisconsin Still Slow, Despite Numerous Tax Breaks

11:35 am in Uncategorized by WI Budget Project

For more information, go to www.wisconsinbudgetproject.org.

Wisconsin continues to perform poorly in private sector job growth, according to new employment figures released today.

The number of private sector jobs in Wisconsin grew by 1.2% in 2013, compared to 2.1% nationally. The new jobs figures come from the Quarter Census of Employment and Wages, which this Milwaukee Journal Sentinel article calls “the most credible and comprehensive” figures available.

 

Wisconsin job growth has been slower than that in neighboring states, according to the Journal Sentinel:

In the first three years of Walker’s term, the data show that Wisconsin ranked 35th of 50 states in the rate of private-sector job growth. That puts it behind the nearby states of Michigan (sixth of 50), which is bouncing back from a searing downturn in the auto industry; Indiana (15); Minnesota (20); Ohio (25); Iowa (28), and Illinois (33).

State lawmakers have passed dozens of tax cuts since 2011, but that hasn’t spurred job growth. Despite nearly $2 billion in tax cuts over four years, job growth in Wisconsin continues to be slower than anyone would like, and our growth in gross domestic product is also well below the national average.

GDP Numbers Confirm Wisconsin’s Lagging Growth

12:10 pm in Uncategorized by WI Budget Project

Wisconsin’s economic growth has lagged behind that of most other states, according to the Bureau of Economic Analysis. The new report issued last week provides inflation-adjusted statistics on gross domestic product (GDP) in every state for each of the years from 2010 through 2013.

The following graph illustrates that Wisconsin’s GDP growth of 4.5% over the last three years has been well below the national average of 6.1%.  Wisconsin has also lagged behind the other states in upper Midwest, except for Illinois.

 

The second bar graph compares the annual growth since 2010 in Minnesota, Wisconsin, and for the U.S. as a whole. Some conservatives have argued that Wisconsin’s economy would grow more rapidly because our state has been cutting taxes and practicing austerity during a period when Minnesota raised taxes. The graph illustrates that Minnesota’s growth has been stronger for each of the last three years.

 

If Wisconsin’s economy had grown at the same rate as the national average over the three years since 2010, our state GDP would have been about $4 billion higher at the end of 2013. If we had kept up with the pace of economic growth in Minnesota over the last three years, Wisconsin’s GDP would been $7.6 billion (3.0%) larger than where it was at the close of 2013.

by Jon Peacock

Still Waiting: Unlike U.S., Wisconsin Has not Returned to Pre-recession Job Levels

12:10 pm in Uncategorized by WI Budget Project

Finally.

After more than six years from the start of the Great Recession, the U.S. at long last has more jobs than it did before the recession. For Wisconsin though, that achievement is likely to be a few months in the future.

As of April 2014, there are still 27,700 fewer jobs in Wisconsin than there were in January 2008, according to the Bureau of Labor Statistics. At the current rate of job growth, it means that Wisconsin won’t achieve pre-recession job levels until sometime this fall.

Once Wisconsin returns to pre-recession employment levels, additional jobs will need to be added to make up for the population growth that occurred during the recession. Wisconsin still needs to add more than 100,000 additional jobs just to keep up with growth in the working age population, according to the Center on Wisconsin Strategy.

Employment in Wisconsin may be nearing pre-recession levels, but the type of jobs has changed. As shown in the chart below, Wisconsin now has far fewer jobs in manufacturing and construction – jobs that pay relatively high wages – than it did before the recession. This trend reflects national patterns – employment in low-wage occupations grew twice as fast after the recession as did the number of jobs in mid-wage and higher-wage occupations, according to the National Employment Law Project.

Sometime this year, the Wisconsin economy will probably have as many jobs as it did before the recession. But further gains will be needed before Wisconsin workers are as well off as they were in 2008.

by Tamarine Cornelius

As Medicaid Participation Surges Nationally, Wisconsin Experiences Much Slower Growth

11:02 am in Uncategorized by WI Budget Project

National data released last week show that there has been a sharp increase in Medicaid enrollment since last September, and that trend continued in April.  One surprising aspect of the latest HHS data is that the growth in Wisconsin trails that in most other states, even among the states that haven’t expanded Medicaid eligibility.

Nationally, 6 million more people were enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) in April, compared to the 3-month period before open enrollment under the Affordable Care Act began last October. That includes growth of 1.1 million additional people in April, as compared to March (in the 48 states that reported data for both months).

The following graph illustrates that the increases have been much higher in the 25 states that have accepted federal funds to expand Medicaid eligibility for adults to 133% of the federal poverty level. The average increase of 10.3% for all 50 states compares with a jump of 15.3% in the expansion states in April (relative to the average enrollment in those states from July through Sept. 2013).

 

In contrast to the other “non-expansion” states, Wisconsin boosted eligibility for childless adults to 100% of the poverty level. Although that partial expansion of eligibility is partially offset by a significantly reduced income cap for parents in BadgerCare, the increase in the number of childless adults enrolled in BadgerCare is already substantially larger than the decline in parent coverage (thanks to much faster than expected growth among childless adults).  That makes it surprising that Wisconsin’s net increase of 1.1% (12,300 people) over the past 7 months was only one-third of the 3.3% average in the other non-expansion states.

I think a careful analysis of the latest Wisconsin data on the DHS website helps explain the smaller increase in Wisconsin. In contrast to the majority of states, where enrollment of kids has increased since September of last year, my analysis of the DHS data reveals that at the end of April there were almost 5,000 fewer children participating in BadgerCare than in September 2013. That’s surprising because the budget bill assumed that the Affordable Care Act would gradually result in an increase of nearly 40,000 already-eligible children being covered in BadgerCare.

Later this month, I’ll take a much closer look at the complicated tends in Wisconsin among already-eligible children and parents.

You can find last week’s report here.

by Jon Peacock

Missing Out: Recent Tax Cuts in Wisconsin Deliver Little to People Who Earn the Least

11:44 am in Uncategorized by WI Budget Project

If the Wisconsin legislature wants to keep taxes low for people with modest incomes, the best way to do that is to strengthen tax credits that keep taxes affordable for low-income people and individuals, not hand out untargeted tax cuts. That’s the conclusion of a new analysis released by the Wisconsin Budget Project, which takes a look at the distribution of the recent tax cuts passed by the legislature.

Three major tax cut packages passed by the Wisconsin legislature in the last year have delivered relatively little benefit to people who earn the least, according to the analysis. In 2013 and 2014, the state legislature passed three substantial tax cuts: A June 2013 cut in income tax rates, an October 2013 property tax cut, and a March 2014 combined property tax cut and income tax rate cut package.The three tax cuts combined give the bottom 20% of income earners in Wisconsin – those earning an average of $14,000 a year – an average tax break of $48 in 2014. In contrast, the top 1% of earners – who have an average income of $1.1 million – received an average tax cut of $2,518, fifty-three times higher than the tax cut received by the lowest income group.

Put another way, people in the top 1% will save more on taxes each week from the tax cuts than the lowest income group will save over the course of the whole year.

Only a very small share of the value of the tax cuts went to people with low incomes. Out of every dollar of tax cuts, just $0.04 goes to the bottom 20% of earners, according to the analysis. Taxpayers in the next highest income group didn’t benefit much either: they received just $0.08 out of every dollar in tax cuts. Together, the bottom 40% of taxpayers receive just $0.12 of every dollar in tax cuts. In contrast, the top 20% of earners receive half the value of the tax cuts, the same share as the rest of the 80% of earners combined.

When the tax cuts are measured as a share of income, the lowest group of earners received the second‑smallest reduction in taxes.

The full analysis, which is based on information from the Institute on Taxation and Economic Policy, is available on the Wisconsin Budget Project website.

Sizing Up Wisconsin’s Budget Challenges

10:57 am in Uncategorized by WI Budget Project

Close up of a dollar bill

A closer look at Wisconsin’s budget.

Several significant pieces of Wisconsin budget data were released late last week:

  • Our state is facing a structural deficit of $642 million in the next biennium, which means that $642 million of growth in General Purpose Revenue (GPR) will be needed even if there is no net increase in spending levels in the 2015-17 budget.
  • State tax collections were 21% lower in April than in the same month of the previous fiscal year. (See our May 23 blog post.)
  • Total Wisconsin tax collections over the first 10 months of the current fiscal year are $21 million less than in the comparable portion of 2012-13.

None of these news items is cause for alarm right now, but the convergence of these facts means the state’s fiscal situation merits watching and might prove to be weaker than some state lawmakers have assumed.

Before taking a closer look at some of the cautionary considerations, let’s start by reviewing several positive perspectives on the state’s budget situation:

  • The estimated structural deficit for 2015-17 is substantially smaller than the budget challenges the state faced in most of the other budgets since the late 1990s.
  • Revenue growth could quickly erase the structural deficit in the next biennium (though that’s true only if tax revenue grows significantly faster than spending needs).
  • The Rainy Day Fund has risen substantially over the last couple of years and is now at almost $280 million.

Yet despite those pieces of positive news, which have been cited frequently by many lawmakers, there are a number of reasons to think the foundation for the next biennial budget isn’t rock solid:

  • The structural deficit for 2015-17 could increase substantially if the recent downturn in state tax collections proves to be more than an aberration. If it’s a trend that cuts into the anticipated revenue in 2014-15, that wouldn’t merely eat away at the state’s slim budget balance; it would also cause a jump in the structural deficit by lowering the base level of General Fund revenue, which is a critical variable in those deficit calculations.
  • The estimated structural deficit assumes that the state won’t continue to use $108 million GPR per year for transportation spending.  If that short-term appropriation is reauthorized, as I suspect it will be, the state’s GPR needs would grow by an additional $216 million in 2015-17.
  • Although the Rainy Day Fund has increased in recent years, it is less than 2% of annual GPR spending, and many budget experts recommend that states should have reserves and/or contingency funds of 5% to 10% of spending. In order to allow for larger tax cuts, lawmakers recently suspended the statute that requires depositing 50% of higher-than-expected revenue growth into the Rainy Day Fund (read more here).
  • The other part of the state’s reserves is a budget cushion or estimated balance that currently stands at $165 million (a little over 1% of annual spending). The structural deficit calculations assume that balance will be spent down to $65 million in the next biennium, which is currently the statutory minimum. Governor Walker and other governors have made the structural deficit appear smaller by repeatedly postponing a statutory requirement that would make the long-overdue change of raising the required minimum balance to 2% of annual GPR spending.

During the campaign season two years ago, Governor Walker and GOP legislators were able to score points by noting that they had eliminated the structural deficit. They won’t be able to do that this year, but if tax collections rebound and get back on target, thereby keeping the estimated structural deficit from getting any larger, I suspect the deficit won’t be much of an issue this year. On the other hand, lower-than-expected state revenue could significantly increase the state’s fiscal challenges in the next biennium and might add a different dimension to the fall campaigns.

For more, go to www.wisconsinbudgetproject.org.

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Wisconsin State Tax Collections Drop 21% in April

8:18 am in Uncategorized by WI Budget Project

For more, go to www.wisconsinbudgetproject.org.

A dollar bill cut into shreds, with a calculator

Wisconsin’s tax collections declined sharply in April.

Figures released Friday by the Wisconsin Department of Revenue indicate that state tax collections were 21% lower in April than in the same month of 2013 – primarily because of a $332 million drop in individual income tax revenue. Perhaps more importantly, tax collections have been falling for the past several months – to the point that total tax revenue over the first 10 months of the current fiscal year is now a little bit (0.2%) below the total at this point of the previous fiscal year.

Of course, part of the sharp decline in April can be attributed to income tax cuts that took effect at the beginning of tax year 2014, and part is the result of reductions in income tax withholding that took effect on April 1. Those variables and others make it difficult to do the number crunching to assess whether the latest drop in tax collections is cause for alarm – especially on a gorgeous afternoon when I’m anxious to get out of the office and start the holiday weekend. That said, the latest Wisconsin numbers and the recent revenue downturns in a number of other states suggest to me that the state’s fiscal situation bears watching carefully and might not be as strong as many people have been suggesting.

A Legislative Fiscal Bureau paper released Thursday indicates that tax collections in the current fiscal year have been expected to total $14.40 billion. That would be an increase of $244 million over the previous fiscal year, and hitting that level of growth will require a significant upturn in May and June. But in my opinion, whether the state falls short of the projection for FY 2013-14 is probably less important than the question of whether a slowdown in the second half of this fiscal year will signal a significant shortfall in the second year of the biennium.

Here’s where we stand on some of the particular sources of Wisconsin state tax revenue over the first 10 months of the fiscal year:

  • State individual income tax collections are now $265 million or 4.5% below the comparable period in 2012-13.
  • Corporate income tax revenue is up about $29 million (3.9%), but has a long way to go to reach the $140 million increase assumed when revenue estimates were revised in January.
  • On the plus side, sales tax revenue is up by $185 million, or 5.7%. Although that growth slowed a bit in April, it looks like we ought to be able to reach or surpass the 5.2% increase in sales tax revenue assumed for the full fiscal year.

In a blog post this afternoon, the WisPolitics Budget Blog quotes Bob Lang, Director of the Legislative Fiscal Bureau, who said that the total collections have been a little “weaker than expected.” Lang added that June is a significant month for corporate revenue and should give us a better idea of whether tax collections are matching projections.  We’ll take a closer look at the data a month from now.

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The True Cost of Cheap Eats: Fast Food Workers in Wisconsin Strike

2:02 pm in Uncategorized by WI Budget Project

Fast food workers in Wisconsin took part in a national strike today to rally for higher wages. Strikes took place in Milwaukee, Madison, Wausau, and other Wisconsin cities. Workers are advocating for a wage floor of $15 an hour.

Wages in the fast food industry are low, and benefits are scarce.  A typical front-line worker in a fast food restaurant earns $8.69 an hour, and only 13% of workers receive health benefits through their employer. In Wisconsin, 28,000 people work in front-line fast food service.

Low wages in the fast food industry might be more acceptable if workers had opportunities to earn higher wages as they gained experience and seniority. But fast food jobs offer very limited opportunities for advancement. Only 2.2% of jobs in the industry are managerial, professional, or technical occupations, and most people who start as front-line workers have few opportunities to move up.

Many fast food workers are struggling to raise families on very low wages. The median age of fast food workers is 29, and two-thirds of all workers are women, characteristics that might contrast with our mental picture of a “typical” fast food worker.  To see just how hard it is to get by on fast food wages, you can enter your family characteristics and city of residence into this calculator, and find out how many hours you would have to work at fast food wage levels for your family to achieve economic security.

The low wages and poor benefits of fast food workers mean that many workers receive economic support from state and federal programs. In Wisconsin, 34% of fast food workers’ families participate in at least one of three public programs: the Earned Income Tax Credit, Medicaid, and SNAP (formerly called Food Stamps).  The total public cost of fast food worker participation in these programs was $166 million in 2011, an amount that would be reduced if fast food workers were paid higher wages.